If you want to invest in commercial real estate with a steady yet passive income stream in mind, a triple net lease makes an ideal choice. It works for newbies and seasoned real estate investors because the risk level is low and income potential is consistent and lasting. Moreover, the option is hassle-free because the tenant bears most operational costs such as insurance, maintenance, and property taxes. The arrangement may lower the rental amount a little, but consistency and convenience make up for it. Everything boils down to choosing the right NNN property for investment. Here are some factors that can guide you with the choice.
Location of the property
The most important criterion for choosing a NNN investment is the location of the property. Look for one that is established and accessible because it promises to be in demand at all times. Being clearly visible is an additional advantage, and it is why corner locations are considered the best. Additionally, you must bear in mind the other businesses operating nearby the building. The presence of strong anchor locations in proximity boosts the visibility and demand for the area, making it ideal for businesses looking to set up there. The type and form of the building also make a difference. For example, if you choose a property with a large floor area, it is suitable for various types of businesses. So there are good chances that re-lease will not be a problem.
The creditworthiness of the current tenant
The creditworthiness of the current tenant plays a significant role in the buying decision. When you make a NNN investment, you expect the property to generate a steady stream of rental income. Already having a creditworthy tenant in there gives you an advantage because you will not have to worry about regular rent payments. It is best to look for a Triple net property for sale occupied by established clients such as publicly traded companies and brand chains. Further, businesses such as convenience stores, drug stores, medical clinics, grocery stores, and dollar stores are more likely to continue leases for the long haul because they are more stable.
Term of the lease
The core objective of Triple Net investment is to generate a steady income stream in the form of rent from a lease. It makes the term of the current lease an important factor to consider. If the remaining lease term is short, you will have a short-term income stream. You can re-lease the property, but it is often stressful, expensive, and time-consuming. It is best to buy a NNN property with an extended lease term for the current one. Ideally, you should look for one that has a decade or more to go. However, you can settle for a bargain price if the remaining lease period is short, but you plan to invest only for the short term.
NNN investment takes a little smart thinking, but the right choice sets you up for a lucrative deal. You can enjoy a steady income potential without worrying about re-leasing and losing out on the rental value.